By now, everyone is familiar with the argument that America's economic future is threatened because "we don't make anything here anymore."
We have highlighted this argument -- and our disagreement with it -- in previous posts, such as this one in which we took exception with arguments that America is left with nothing but a "phony service sector economy" now that we have thrown away all our manufacturing production. Examples of this line of argument abound, such as this article which bemoans the fact that there are fewer manufacturing jobs in the US today than there were in 1979, and this article which strikes a similar tone.
While there may be fewer workers actually employed in manufacturing today than there were in the 1970s, the undeniable fact is that American manufacturing output is enormously higher today than it was in the 1970s -- or at any time in the past for that matter -- as the chart above illustrates. Much of this increased productivity is the result of improved technology.
More goods being produced with fewer people is the very definition of increased productivity. Occasionally, someone will argue that producing more with fewer people is bad (because it reduces the number of available jobs), but that is a fallacious argument. If it used to take ten or twenty workers to produce one washing machine or Corvette or other manufactured good, and today it only takes two or three workers (plus some machines and robots that weren't available in the past), then it stands to reason that there will be relatively more Corvettes or washing machines available per person than there were before, and that such goods will actually become more affordable to a larger number of people. And in fact, this is exactly what has happened -- any examination of the statistics from the 1970s versus today will show that American households now have more cars, washing machines, televisions, and just about everything else than they had forty years ago. It is absolutely wrong-headed to argue that we should want to go the other way and use more people to produce the same amount of stuff, thereby making everything less affordable.
While many people do not come across examples of American manufacturing in their day-to-day lives, this does not mean they do not exist. There are a great many little companies all across America contributing to the tremendous manufacturing chart shown above. We come across them every day in the research that we do as managers of investment portfolios. Remember that the amazing rescue of the trapped miners in Chile last October was facilitated by a special drill bit that was invented and manufactured in Pennsylvania. Other American manufacturing success stories include the following companies* that you have probably never heard of:
- John Bean Technologies Corporation, a designer and manufacturer of equipment for the freezing and chilling of foods, the cooling of aircraft, and other airport and food-service equipment. Based in Chicago, Illinois.
- Kaman Corporation, a designer and manufacturer of complex power transmission components, motion control systems, aircraft bearings, and metallic and composite aerostructures used in the aviation and defense industries. Based in Bloomfield, Connecticut.
- Middeby Corporation, the inventor of the conveyor oven and a designer and manufacturer of industrial-strength ranges, broilers, steamers, fryers, charbroilers, and other cooking and food dispensing equipment. Based in Elgin, Illinois.
- Kemet Corporation, a designer and manufacturer of dielectric capacitor solutions using high-tech materials such as tantalum, multilayer ceramics, electrolytic aluminum, and other materials. Based in Simpsonville, South Carolina.
- MKS Instruments, a designer and manufacturer of instruments, components, and subsystems for vacuum and gas-based processes for a variety of industries, including the semiconductor, pharmaceutical, chemical, electronics, and energy industries. Based in Andover, Massachusetts.
- Kronos Worldwide, a producer of titanium dioxide pigments used in coatings, plastics, papers, fibers, foods, ceramics, paints and cosmetics. Based in Dallas, Texas.
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* At the time of publication, the principals of Taylor Frigon Capital Management did not own securities issued by John Bean Technologies (JBT), Kaman Corporation (KAMN), Middleby Corporation (MIDD), Kemet Corporation (KEM), MKS Instruments (MKSI), or Kronos Worldwide (KRO).